Talk with Chairman of 48 Group Club

Stephen Perry, chairman of the 48 Group Club, told the Economic Observer that China will lead way to engage western countries as China will have a better sense of what it wants and what it can do.

Interviewed on the eve of G20 London summit, he said while people had many unrealistic hopes about G20 before, they now realised the seriousness and widespread of the problem. The solutions to the current crisis are going to be quite complex and diverse. "It is not going to be about quick solutions or just money." Facing the global economic crisis, there is much China can do and also very little China can do. It is way beyond any single country to solve it.

"G20 is too big to be a mechanism that can really solve the problems. Too many people need to agree and that is not realistic." So it is better as a forum "to enable people to move their thinking forward in a very real way. It is also a forum to call for a positive attitude to free trade," said Stephen Perry.

He believes while Asian countries are ready to help to boost IMF if the terms are fair, they are "on a road to Asian solutions". Regional approaches will be more important. He also suggested that it will take long time to change the dominance of US dollar as the main global reserve currency, meanwhile an Asian currency will develop and the euro will be expanded.

When discussing the bilateral relationship between China and Britain, he said British industry needs better and bigger markets but it is hard to move changes quickly. "Governments can call for expanded trade but the reality is that companies have their own preferences." "In the end a long process is required to enable Chinese buyers and British sellers to develop their knowledge and trust of each other."

The 48 Group Club is a business network committed to promoting positive relations with China. In early 1950s, a group of western business people who called themselves "Icebreakers" visited the newly founded People's Republic of China to establish trade relations. This later developed into the 48 Group Club. The Club now has more than 300 members including business and political leaders. Last year the Club launched a "Young Icebreakers" programme to encourage young people from both countries to develop better relations.

China will lead the way to engage western countries
EEO: Are you optimistic about the outcome of London G20 summit? What are the likely results?

Stephen Perry (SP): When this meeting was first discussed there were many unrealistic ideas about G20, that it could be a new United Nations for commerce and finance, be an international regulator and reform the IMF and World Bank. Now people really know this is more than one problem and that the solutions are going to be quite complex and diverse. It is not going to be about quick solutions or just money. Even today people do not know what is the full extent and effect of all these problems and the possible solutions.

Secondly, people are learning that the various solutions which sound good cannot fit every country's problems, so universal policies are not practical.But on the other hand there is a huge increase in knowledge and G20 has enabled the world to better understand what is going on across the world.

G20 is too big to be a mechanism that can really solve the problems. Too many people need to agree and that is not realistic. So it is a forum to enable people to move their thinking forward in a very real way. It is also a forum to call for a positive attitude to free trade. G20 has helped the world understand the real world.

EEO: What do you hope China would do at G20 summit? Do you think China should be involved in much talked about "international rescue plan"?

SP: There is much China can do and also very little China can do. It is way beyond any country to solve the global crisis. China has a more substantial academic research going on than most countries. They can help people to realise what is realistic and that time needs to be taken to avoid major policies being introduced which then show do not work. China's greatest contribution is to help China and Asia to overcome this crisis as it did with the Asian financial crisis.

EEO: What the western countries should do to engage China more in current economic downturn?

SP: I think the western countries will find it very hard to understand how to engage China. I think China will lead the way to western countries as China will have a better sense of what it wants and what it can do.
While Keynesian economics is often called for to refloat western economies, people forget his ideas were related to the conditions of the 1920's and 30's and it is a mistake to try and superimpose that on the problems of the 21st century.

We have a completely misaligned financial services industry in the west managed by politicians who supported this kind of free financial world. Neither those politicians who contributed to this problem nor the financial people in it are able to solve it. So there needs to be some time for the people involved to change. If the same people from the same backgrounds and philosophies stay in leadership then the problems cannot be overcome. Western banks need to go back to old style borrowing and lending and need to be downsized into a form which helps restructure ailing industries and is not just a means to carve out super profits.

The west needs to decide to start again and rebuild its economies on a more sound and stable footing that recognises the realities of the new world. So propping up inefficient car industries by subsidy to prop up jobs has to be replaced by finding real economic roads which produce real added value. While it is good to have some economic stimulus, it is the process of elections and winning them that is driving policies to be fast acting and this problem needs a more careful approach than that.

EEO: How do you think IMF will be restructured?

SP: I think Asia will continue to restructure with an Asian end result. Meanwhile it will help rebuild the IMF if it is fair and representative, but I think Asians are on a road to Asian solutions and I cannot see Asians lending money through the IMF for European countries who are much more important to Austria, Italy and Germany. So there will be restructuring of the IMF but I think that will be less important than other regional approaches. I don't think anyone will say that but that is what will happen.

EEO: Do you have any comment about the call for the replacement of the dollar as the main global reserve currency by the governor of the Chinese central bank?

SP: It must change as the dollar has become an unreliable currency. But it cannot change fast, maybe over 10 - 15 years. I suspect that an Asian currency will develop and the euro will be expanded. The dollar may stabilise after some years but the US budget has to change in a big way to recapture the trust of the world.

EEO: What does British industry hope both the British and Chinese government would do to expand the bilateral trading and investment?

SP: British industry needs better and bigger markets but it is hard to move changes quickly. Governments can call for expanded trade but the reality is that companies have their own preferences. So the Chinese government can buy Airbus or buy Jaguar cars but trade is much more than that. In the end a long process is required to enable Chinese buyers and British sellers to develop their knowledge and trust of each other.

EEO: What kind of roles do you hope the 48 Group Club will play in this?

SP: We have been a force for positive relations with China for 57 years. Recently we have been working to help commercial circles to better understand that China cannot solve the world's problems and what is realistic with China. That is our continuing work - to help understand the real China. At the same time, we also do a lot of work among young people to better understand China and its policies.

EEO: Do you have any forecast of how long it would take for the British, Chinese and the global economy to recover?

SP: As we do not know the real problems yet we cannot say how long the solutions will take to work. Some think this is really like the Asian crisis, partly caused by some who made huge profits. If so maybe 1-2 years. But if it is really about the core, then it is going to take 5 or more years to solve.